China - BOGOR, Indonesia (12 February, 2013)_ As China and Vietnam move toward decentralised, market-baed economies, they will need to improve the cost-effectiveness of ambitious programmes offering cash rewards to farmers who help protect forests, watersheds and other vulnerable ecosystems, a new study by the Center for International Forestry Research suggests.

Local communities, whose participation at the moment is generally mandatory, will also need to have a greater say in how they manage the land.

“The key is to find a way to make these Payments for Ecosystem Services (PES) schemes sustainable in the long run,” said Vijay Kolinjivadi, lead author of the report looking at the governments’ driving role in the projects and what impact that has.

“As currently designed, these schemes may eventually require external funding, from international donors or non-governmental organisations,” he said.

Policymakers across the globe worry about how the food, water and shelter needs of seven billion people may be irreparably damaging our planet. The clearing of tropical forests, intensified farming production and industrial-scaled ranching have resulted in soil erosion, deterioration of water resources and a general loss of biodiversity.

China and Vietnam, which have both experienced unprecedented economic growth in recent decades, are offering incentives to those who adopt land use practices that benefit society as a whole.

But these programmes, aimed at protecting forests and promoting watershed conservation, have cost tens of billions of dollars.

And because they are carried out on state-controlled land, farmers have little choice but to take part and have little or no sense of ownership.

Kolinjivadi hopes district chiefs, farmer councils, and other local institutions will eventually play a larger, more significant role.

“We have a unique opportunity here,” said Kolinjivadi, who sees the role of the government eventually shifting from primary driver to facilitator, promoting direct, fair negotiations between contracting parties.

“The hope is that these countries will be able to design appropriate arrangements to manage natural resources by enhancing the bargaining power of communities, and the households that comprise them, through deliberation, repeated interaction, and adaptive management of the payments over time.”

Following the great Yangtze River flood of 1998, China’s central government decided to take steps to mitigate the negative environmental impacts of farming on steep slopes, particularly in terms of run-off and soil erosion. Its Sloping Land Conversion Program (SLCP), introduced one year later, became what is possibly the world’s largest land retirement program, targeting the conservation of land in regions that are home to some of the main watersheds. There are areas, too, where farmers are typically poor.

Under the deal, farmers have the option to convert farmland on slopes of 15 degrees to 25 degrees or greater to forest or grasslands. In compensation, they are given both cash and grain subsidies and provisions of tree seedlings.

Vast state-sponsored financing will fall short of objectives in improving water security and improving livelihoods if attention is not turned to improving the cost-effectiveness of [PES] programmes over the long-term.

Keeping these programs in operation, however, does not come cheap, with more than US$45 billion already devoted to SLCP.

While initiated by the central government, it is implemented by cash-strapped local agencies, many of whom are eager to find ways to garner more money after they meet their conversion quotas.

While that may help expand the program (while plugging budgetary deficits), the fiscal burden to the state grows as more farmers are roped in to participating.

At the same time, limited technical support and poor quality seedlings means that many trees planted on former farmland often do not survive, thereby, undermining whole projects.

“Vast state-sponsored financing … will fall short of objectives in improving water security and improving livelihoods if attention is not turned to improving the cost-effectiveness of these programmes over the long-term,” Kolinjivadi says.

One solution would be to top-up state funds by appealing to the private sector, such as non-governmental organisations, he said, but warning that private donations only stretch so far and for so long.

And without sufficient funds, entire schemes could be at risk.

Meanwhile, Terry Sunderland, co-author and CIFOR lead scientist, notes that where farmers in China received too little compensation or are forced into participating, there was a strong likelihood for reconversion of land to cultivation.

To prevent this, Kolinjivadi argues PES schemes need to be seen by villagers as more than sources of steady money. As such, they must focus more on enhancing the well-being of PES service providers by providing technical and agricultural support as well as empowerment through micro-credits and loans.

“This would help make sure payments are invested in a way that reflects the interests of communities and individual households, while linking ecological stewardship with human well-being,” he said.

The economy in Vietnam, a mountainous country with a monsoonal climate, is largely dependent on watershed services provided by forests, especially in rural upland areas where agriculture and hydropower are important sectors.

It chose the provinces of Son La and Lam Dong for PES pilot projects designed to implement Decision 380 (named after its legislative number) and subsequent national law in Vietnam. In addition to being near major population centres, therefore putting high demands on municipal water use and hydropower developments, they were considered ideal because of their proximity to national parks.

Among other things, that meant high participation of vulnerable communities, minority groups and women.

“It’s important that attention is placed on understanding existing social relationships,” Kolinjivadi said, “rather than the more short-term focus on external financing to motivate actors.”

He added that, ideally, incentive-based negotiations would not need to invovle cash payments, but could be based on cross-community trades or more informal economies of exchange.

“Obviously, this perspective is rather far from the current situation of heavy-handed centralised control, but with potential further decentralisation in the future, we may see the emergence of more informal PES-like arrangements,” he said.

The incentive would be not farmers producing for profit, but farmers having ownership over their own land, and receiving credit and incentives for preserving watersheds and forests. Thus receiving subsidies on crop insurance. The only way this can work in a Communist society, is if the land is privatized. Communism will have to be demised in Asia, the same way it was in Europe.

Thanks for this – offers insights that cover a spectrum of issues with REDD/PES schemes as they stand. A few highlights for the forests /PES community to think more on:
1. Scale of funding – $45b is a staggering amount to pour into PES, surely the largest single programme of its kind? This makes Norway’s $1b deals look like pocket money and emphaises the real costs of changing practices of individuals all over thw world. it is interesting that this money is available when the benefits are accrued locally (to downstream water users) but not for global goods.
2. Benefits to recipients – it is interesting to think about whether the money should be distributed as cash or as other benefits and livelihood support programmes. However I wonder how this is affected by the ‘forced’ particpation rather than voluntary involvement, and therefore whether the true incentive cost would be higher if it were voluntary?